The essence of indirect network effects theory is the understanding that software and
hardware form a system (Chou and Shy 1996; Economides 1989; Katz and Shapiro 1994). As they
form a system, the supply of software and the demand for hardware may affect each other,
according to a specific temporal pattern. Both may also be affected by other variables. For instance,
the supply of software may be affected by the supply of software in previous periods and hardware
sales may be affected by its price and past hardware sales. We next theorize on all these effects.